The Dark Side of Roofing: Insurance Scams, Storm Chasers, and Why Homeowners Get Burned

I'm hoping for a storm every year. I want business.

Yeah. We're going to be talking about the dark side of roofing.

Deny, delay, and defend. Typical insurance. The hardest part is trying to get that customer to understand, don't listen to the insurance company.

Yeah.

They are not your friend. It's really frustrating.

Storm chasers, oh my.

You've got guys that come in, take the money and run in the storm chasing world. That's the dark side of it.

How seasonal is roofing?

It's a very seasonable business when it comes down to the end of the year. All you got to fill is you just need more leads.

Yeah.

Can't get enough.

What do you think the hardest part of running a roofing business is? Welcome back to Owned and Operated. I'm your host, John Wilson. I run a plumbing, HVAC, and electric company in Cleveland, Ohio, and for fun, I run a podcast talking about random shit like this. Today, I'm joined again by Adam Cherup, and we're going to be talking about the dark side. Of roofing, Luke. I am your father. I am your father. So the dark side of roofing insurance, storm chasers, broken incentives. Oh my!

Oh me, oh my!

Oh me, oh my! Where do we start? Yeah, we're going to start on this.

We went from Star Wars to what is it? The Yellow Brick Road.

Wizard of Oz.

Wizard of Oz.

Yeah, yeah, yeah.

I don't know. I guess let's let's start with the worst one of them all.

That's yeah. What's the insurance one?

Yeah, seems like insurance, man.

I don't know for you, but.

But for us in the roofing industry, and, and especially in Florida—

Oh yeah.

Man, does it suck.

It's gotta be tough in Florida especially.

Does it suck to try and get a roof bought through insurance? So typical insurance delay, uh, deny, delay, and defend. They don't want to pay you even though you've paid them thousands and thousands of dollars. Uh, yeah, it's, it's really frustrating. So for our business model, what we really found works best for us is to push them towards a retail client. Let's try and get them funded some way through some type of funding, whether that's in-house or through a loan. Let's get the roof done. Let's get them in touch with the right attorney. Yeah, get it litigated on the back end and get them repaid and pay that loan off early if they can. And if they can't, then they still got a loan, they still got a new roof, and they still got a lawyer that's going to help them get through the process. I hate insurance companies.

Yeah.

I really do. I hate paying them. Yeah, I hate fighting with them. Just don't like them altogether.

Yeah. Yeah, it's tough. We, we have to deal with insurance with our restoration business and we don't have to deal with it at all really for like plumbing, HVAC, electric. But with restoration, it's, you know, it's almost all insurance, right? And it is tough. I mean, it's really tough. And I think the, you know, it's all sort of a bullshit game. The whole thing is a bullshit game. And when I think about healthcare, I think what's interesting is when businesses sort of opt out of it. So healthcare, there's a growing trend towards insuranceless medicine. So doctors will open up these practices that are cash pay, sometimes even like, hey, $2,500 a year, I'll never bill your insurance. You can call me as many times as you want. You can come as many times as you want. I'll do any test that you've ever wanted to run. Like genetic tests, cancer tests, whatever. Whereas with normal medicine, that all has to go through insurance.

Oh, you'd never get that.

You'd never get that done. You could never do preventative testing or cash-only dentistry or cash-only eye. And what's surprising is it's a lot cheaper and it's way easier.

We got a bill for a surgery that my wife had recently, and it was like they didn't pay for anything. And I'll bet if I didn't have insurance and just asked for a cash price, I guarantee you it would've been cheaper.

Way cheaper. Yeah, it would've been way cheaper. So my friend just did— so I joined one of these doctor things. It's like $2,000 a year or something, right? Okay. It's called Concierge Medicine. And so I joined one of these things and I have never had a bunch of tests done because every time I've asked a conventional doctor, I know this isn't a medicine podcast, but every time I've asked a conventional doctor, they're like, oh yeah, No, like, I want— I want—

you don't need that.

Yeah, I want like a cancer screening, like, hey, do I, you know, am I at risk, right? What's my genetic screening or whatever? And I had a friend do a genetic cancer screening through insurance and it was like $7,000. My cash price was $150. $150 freaking dollars. And I'm like, what a scam. This is crazy.

What a scam.

So it feels the same way with, uh, with restoration where Our— their job is to, you know, what was it, defend, delay, defend, deny.

Yeah, I've learned this, and I, I really learned this doing insurance work.

Yeah.

And I was a part of a, uh, nonprofit that got started, and it still goes today. It's called, uh, American Policyholders.

Yeah.

And they fight against insurer fraud from the inside, from the insurance company. They are really effective against, uh, the lawyer, the insurer, the engineers in Hurricane Sandy. They found insurers and that had engineers falsifying reports.

Yeah.

And changing my write-ups, let's say. So if I did the write-up for the roof, they've got an engineer that changes it that says it's okay instead of me saying it's not okay, or my engineer that said it wasn't okay.

Yeah.

Uh, so this nonprofit got started for that reason.

Yeah.

And what we learned in studying the insurance companies is they actually out a manual to their people that teaches them to deny the claim, defend the denial, and then litigate it.

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Not only that, and then let's say they would try and approve the claim. They either want to approve it for no money where I can't do it, or they want to invoke a right to repair for their specific people that are going to come out and say, oh, you don't really need everything, you only need this. Yeah. So it's just the— it's one of the biggest scams I've ever seen in my life.

Yeah. Yeah, it's pretty rough. Yeah, we have found it's sort of like a two-way street over the past. You know, we've run a restoration business now for over 5 years, and it was only in the last year that we really started to understand like how to win at insurance. Because what would normally happen is we would go fill— we would send them an invoice for like $10,000, like, hey, it costs $10,000 to fix this person's home.

Right.

And they would fire back and be like, actually, it was $6,000. And like, we just dealt with that for years. And then we like, we negotiated, maybe we got it up to 7 or something like that. But like half of our operator's job over there, Sarah, is negotiating with insurance on the invoices that we sent. Like, it's a really big part of the deal.

Yeah.

And about a year ago, with the help of a friend who's, I think, a listener, he really helped walk us through like, hey, well, actually you have to add all these codes because they negotiate those less and you have to like Check these boxes so they can't fight when you submit that thousand dollar whatever.

It's crazy.

So yeah, it's sort of like it's a two-way street of like okay, they're gonna you need to give them something here, so do something over here. But in the process, average ticket doubled.

I will say you definitely get a higher payout.

Yeah.

If you're willing to do the insurance work. Two things: you got to put the work in, which is what you just talked about.

It's hard.

And it's hard. You got to have a dedicated person that really knows Xactimate, really knows the. codes and what they want to see and can fill that report out just right. And you got to be willing to wait. Yeah, because they are not the quickest people to pay.

Oh yeah. And if there's disasters, we found this out 2, 3 years ago, there was some disaster like, yeah, 3 years ago. And average time to receive money went from 30 days to like 120, 150 because they got so backlogged they couldn't release any funds. And that just came out of like left field.

Yep. Welcome to my world. And then you're gonna— now you're talking about floating, you know, $20K in materials.

Yeah.

And another $5K in labor. You're, you're $25,000, $30,000 out the hole.

Yeah.

Waiting on a paycheck.

Yeah.

And you're waiting 120 days for that paycheck.

Yeah. Yeah, it was pretty rough. Yeah, insurance is tough. Now I think with, uh, similar to the medicine, you can choose to just not. Yeah. I mean, I know guys that are like Retail roofs only. We don't touch insurance. We're—

I would say we're probably, if you want to compare just insurance and retail, I would say we're 80% retail and 20% insurance.

Yeah.

Our sister company next door to us, I would say they're doing maybe a little 60/40, a little bit more on the insurance side, 40% on the insurance side.

They're—

they'll chase hailstorms. They've got a bigger area that they cover. Um, but for us, it's, it's really all, let's push that to a retail job so, A, I can get you done right away. Yeah, right. Speed is the factor in getting this done, and that's one of our pushes. A, roofs in 10 days or less. I want to get your roof on as quickly as I can.

Yep.

And if you are a retail client, I can get that done a lot faster.

Yeah.

And then let's go about getting your claim processed after the fact. Okay, you don't have to You don't have to wait. That's, I think, a lot of misconception with people going through that. You know, they're, they're going to go through an insurance claim probably once in their life for their house. We as a company are dealing with that all the time.

Yeah.

So the hardest part is trying to get that customer to understand, don't listen to the insurance company. They're not your friend.

Yeah.

They're saying they're going to send an engineer. That guy's not going to side with you.

Yeah, yeah, yeah. He's against you.

Yeah. They're not your friend where everybody thinks Mr. Insurance Man is my buddy. They're really not. So if I could caution anybody that's listening or watching or anything, listen to your contractor. They are what they— that's what they do. When you go to the doctor, you listen to the doctor. It burns me when I go to the doctor and then I submit something to my insurance company and somebody at an insurance company who's not a doctor says, No.

Yeah.

Did you go to medical school to tell me no? Or should the doctor know better? Does the roofer know better about the roof, or does the guy sitting at a desk that's never been on a roof know?

Yeah.

So that's where I compare it to. And I really try and educate the customer as much as possible and, and push them, hey, let's maybe go a different way and we'll help you out.

Yep.

We'll help you get that money from your insurance company, but we're going to do it Smarter.

Yeah, a little smarter. Yeah. All right, I like that. Let's do storm chasers next. The dark side of roofing— storm chasers. Yep. What do we got? I mean, you're kind of a storm—

I'm kind of a storm chaser, so I look at that as a double-sided coin. Yeah, say you got good and bad in the storm chasing world. You got people who want to come in and actually do what they're gonna do, what they say they're gonna do.

Yeah.

You're gonna get the value out of them, and they're gonna they're gonna come calling when you need them too.

Yeah.

On the other side of that coin, you've got guys that come in, take the money and run. Literally, take the money and run.

Oh yeah.

Just recently read a post online about a roofing company in Florida, in Tampa.

It's always Florida man. It's always it's always Florida. It's always a man in Florida.

Florida man.

Yeah, it is.

So that's why we have the Florida Man games now. Come on.

Yeah. Yeah.

Uh, no, but it, you know, roofing company in Southwest Florida taking— this lady claims he took $30-some thousand from her, never did any work after Hurricane Ian.

Yeah.

Don't doubt it. Probably he, you know, probably buying himself gifts. It happens. Uh, and that's the, that's the really, that's the dark side of it. That's the ugly side of it is you've got guys chucking a truck.

Yeah.

Even some of them that come in as rep, look like they're reputable businesses, you know. Hire a local guy if you can. Hire a statewide guy if you can. You know, somebody that's— hire somebody that comes to you and is reputable and can prove that they're a reputable person. Not, you know, take a look at the truck, take a look at the little things. Yeah, pay attention to those because the cheapest guy isn't always the best guy.

Yeah, I remember we had a hailstorm here like 6 years ago, 5 years ago, and, uh, we had a roofer out that had done roofs for us before. And we were just like talking about it. I was like, are you busy? And he was telling me at the time that one of the storm chase strategies is you come in and you, you buy an old phone number, LLC, whatever. So you like look for someone that's a one-man roofing show, you buy it for like $50 grand or whatever, and then you just like use that name and then just ditch. So my point is, even if you're looking for like someone with rapport and history and stuff, do your research. Yeah, that's actually a part of the—

which I believe it.

From, from the roofer's perspective, to me that makes actually a lot of sense if you're going to stick around and do the work. But like, yeah, if you can come in and like, yeah, we have 10 years of history, we've been here since whatever, you know, it, it makes sense.

It does. And, and I agree, people do that.

Sticking them with the warranties is what usually happens though. We're going to replace all these roofs, then we're going to move, and like, good luck with the warranties, they're on your name.

That's 100% what happens.

Yeah.

And then those people are stuck calling Yeah, another company like me to, hey, can you come look at this? And hopefully you can help them.

Yeah, yeah.

So a lot of times you can, it's just a matter of chasing down the paperwork if it actually got filed and that kind of stuff. But if it's like a warranty that's a labor warranty, for instance, with that company, and you're SOL, yeah, they're gone. But if it's a manufacturer's warranty, you got a chance. Yeah, you got a chance.

Yeah.

So, uh, yeah, fly-by-night guys, I don't like them. I don't like the 1-800 numbers. That's something to be leery about when you're in a storm situation. You want somebody that's got an area code. You know, that, that 1-800 number, you don't know where they're—

Yeah, yeah, I think there's a moment of panic and they probably come knocking on the door.

Oh, big time. Yep, storm chasers are big-time door knockers. Yeah, big-time door knockers. They will have canvassers out hitting those neighborhoods left and right.

Yeah, yeah.

I don't do a lot of canvassing and door knocking like that. My sales reps on the roofing side, they'll do it. Uh, in neighborhoods where they're working or where we have ongoing jobs, but I'm not actively sending out door-knocking campaigns. That's not my business strategy.

Yeah, yeah.

So, and especially not in a storm situation. That's the last place I want to walk up to somebody's door. I've heard horror stories of people having guns and—

Oh yeah.

Yeah, no, and I, and I'd probably be the guy that pulled the gun on somebody if you came to my house in that situation. I'm not, I'm not gonna lie. But yeah, I just don't want that to happen. I like to have that introduction. I like them to know I'm coming. I like them to have called maybe, or that, that initial introduction's already been done. That's— it's, it's big.

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Hmm, leads, lead generation. Yeah, speed to lead.

Yeah, yeah, it's because someone's got a problem.

It's it's the biggest stopgap. I guess it's the biggest hole you got to fill is you need more leads. You just need more leads. Yeah, you just can't get enough.

Yeah.

And I think it's a very seasonable, seasonable business when it comes down to the end of the year— Thanksgiving, Christmas, New Year's. Nobody wants that roof. Nobody wants to spend that money because they're spending it somewhere else. You don't want people working on your house like that because you got it decorated and it's all fancy, or you got people over. So it's a real slow time of the year for us. Um, other than that, after the beginning of the year, it'll start to pick up. Taxes and everything like that. Everybody wants to get all their stuff. Oh, it's spring cleaning. Let's get, let's get on it. Uh, probably the hardest part about it is that is the planning and the stress that's involved around that, the cash flow. Yeah. Because you know that that's going to be an issue not only at the end of the year, but like, all right, if I don't have enough leads, I'm not going to have enough cash flow at the end of the week. It's just, it's that big cycle.

So how seasonal is roofing?

It's pretty seasonal, I would say.

Even in Florida?

Big time.

Really? Because I guess storm season. So like October's busy.

We're busy through the summer. Yeah, it'll— it really will start to pick up like spring break through the summertime.

Okay.

It is warmer.

Yeah.

Not that it gets super cold in Central Florida.

Yeah.

But people are much more receptive to it. They're getting their tax money back. That's really what I find is now they're planning on it because they're starting to see what the taxes they're going to get are.

Yep.

Next couple of weeks, we're going to get a couple of phone calls more, a couple of phone calls more every week. It'll ramp up. For the next 2 months.

Yeah.

And then we'll be in full swing in March, basically.

Yeah.

Yeah, March through end of hurricane season, so September, I guess, October, and then we start to see the slowdown.

Yeah.

Yeah.

Okay, so it slows down going into hurricane season?

Coming out of it. Coming out of it. Hurricane season is from June 1st through October or November.

Oh, really? Yeah. Okay, apparently I have no idea. I thought, I thought hurricane season was like October to January.

No, no, this is our, this is our dry season now.

Oh, interesting.

And we get all the cold air from you guys, so hurricanes—

You're welcome.

Yeah, hey, we appreciate it. 60s is beautiful when it's— when you're used to 90 with 90% humidity.

Yeah.

Um, no, the hurricanes all come from the south and, and from, uh, Africa, so it's all summer storms that are coming off of the coast.

Okay.

Of Africa.

Interesting.

The more Saharan dust, the less storms.

Yeah, so seasonal is a big part of the deal. Big time. Yeah, that's really interesting. I can imagine that being pretty tough.

I'm, I'm hoping for a storm every year.

Yeah.

Oh yeah, I know that's terrible, but I want business.

Yeah, we did this, uh, we did this in our other one, but just business model breakdown on roofing. What's average? What's average sale?

Uh, I'd say average sale, $20,000, $30,000.

Again, retail. Retail, because insurance is like $11,000, $12,000, right? $15,000?

Uh, I mean, you're getting into To— if you're getting to insurance on a house, yeah, I'm trying to get the same dollar amount pretty much because—

Oh, you're able to really? You're—

you got to. I mean, in Florida, the cost of, of doing roofing is just so expensive. Yeah, it's, it's through the roof. A, it's the—

Ah, see what you did there?

You didn't even notice. Um, it's, it's, it's really bad.

It's—

yeah, I mean It's the highest, if not one of the highest, the, the highest, uh, insurance category is for roofers.

Yeah.

And that's all I have.

Yeah, yeah.

So I mean, you're carrying big liabilities.

Yep.

Uh, million-dollar policies and bigger if you want to do some of the stuff that I'm doing.

Yeah.

You want to get on the government basis, you got to have $5 and $10 million policies.

All right, so $20 to $30 a project.

You're doing—

yep, you're doing a lot of retail, some—

a lot of retail. Some insurance.

I would say the big commercial replacements, I do.

And for most of those, I try and be a labor-only kind of guy.

Yeah.

So I have, again, bigger fish.

Yeah.

But they want a labor source that's closer. So the guy that wanted to bid the Rays Stadium with me, he's out of, um, Louisiana and Texas, but anything he does in Florida, I'm the guy.

That's cool.

Yep. I'm the guy he calls. It's my team, my people that go out and do the actual work. So For me, it's like cashing a check.

Yeah.

And that's the best part about it. I would say average price on those, you're anywhere from $300,000 to— we did a school on Patrick, uh, Space Force Base that was, I want to say, just under a million.

Yeah.

So it's big. You can get some big numbers, which are really nice. And that's, that's where I like to hang out.

Yeah. Yeah.

I give the residential to, to my, to my GM and my wife. They run that division. like clockwork, and I like to take on the more large— yeah, challenging projects. So I'm usually involved for a couple of months on my projects, which is— which is nice.

So how hard do you think roof— you know, we— rating of a difficulty, how hard is roofing to get into, 1 to 10?

Depends on what state you're in. That's the biggest factor.

Yeah.

Do you have to be licensed or not?

Oh, okay. Uh, so I don't think you need licensing in Ohio for roofing.

I don't think you do. I think anybody go do it. You can pull a permit and go do it. In Florida, you have to be licensed.

Really?

100%. And it's the toughest state to get licensed in.

That's interesting. So I've never even heard of a roofer's license.

Yeah, yeah. I'm not smart enough to get one, unfortunately.

That's all right.

You know, my wife's pretty smart. She's got one. She's got a general contracting license. So, uh, it's, you know, it's, it's a tough test to take. I did go try and take the test. It is one of the hardest tests I've ever taken. Uh, I missed it by a couple of points, but you know what? Good thing she's already got one. Yeah. Uh, but it, it's also—

so there's some legislation.

So do you have to get a license is the first thing. Oh yeah, that's the second thing is do you have the capital to commit to it? Yeah, because you got to have some capital. You got to have a trailer. You got to have a couple of trucks.

Yeah, yeah.

You know, are you gonna have it?

Well, alternatively you don't. You know, that's the other side of roofing is like, you can't— could you sub it out? Could you just be the marketing and sales? Because I've talked to some guys that like, that's their deal.

You probably can. I don't know, it's just not— I don't run a business like that. I've always, from my dad, I've wanted to control it because if I control it, then I can get everything out of it. When you start losing control, you're giving away your business.

Yeah, yeah.

And I don't like to do that.

Yeah.

I'll keep my business.

Yeah, that makes sense.

I'll keep control.

Play with my little soldiers. That makes sense. So, 1 to 10, what do you think? If I told you that you could improve bottom line profit by 5 to 10% just by being a little smarter with finances, would you do it? If you're running home service with good bones but finances aren't clear on how they contribute to your strategy and decisions, that's where Tyler and CFO Made Easy comes in. What he does is he helps connect your finances to real decisions around pricing, hiring, and big purchases like inventory or vehicles. He ensures your money has maximum growth impact. It's not a firm and it's not accounting, it's just Tyler. There's no handcuffs, there's no confusing reports. And Tyler has also scaled a home service company himself to $25 million before selling it. So the advice comes from real-world experience, not BS. If you want clearer financial visibility without the noise, book a free 20-minute strategy call with CFO Made Easy. You'll know your numbers, you'll be able to spot cash or margin pressure, and you're going to leave with clear next steps. And make sure you let them know that Owns and Operates 1 to 10, start a roofing business, state of Florida, 9.

Okay, non-licensed state, probably a 5.

Yeah, yeah. I think, um, including the crews, I'd probably put it like a 6. Like, if you're controlling the labor. If you're just sales and marketing, like 2 or 3.

Oh yeah, easy peasy.

I mean, you just literally go knock doors and then you can hire people to sell it out. It's— yeah, it's got a lot.

You can do that.

Yeah, I, I have a friend that spun up a roofing business. I think we've had him on the show. He spun up a roofing business and it got to like $6 or $7 million in the first year and they just sub all the installs. Their sales and marketing business, I believe, really is not a roofer.

He's a sales and marketing guy.

Sales marketing guy.

I'm a roofer.

That's the difference. Yeah.

So, so, so I guess when you compare it that way, yeah, if you're running a sales and marketing roofing business, then I think difficulty is pretty low.

I mean, you're just buying leads and it's pretty easy. Yeah.

If you're actually—

you have to invest into equipment and staffing, I think that is more challenging.

Yeah. Yeah, for sure. Yeah, yeah, there's millions of dollars in equipment invested, so—

Oh, I bet. Yeah, I bet, I bet.

It's, uh, it's fun though. You got toys to play with.

Yeah, yeah, awesome. Well, I appreciate you coming on and walking through roofing. This was a bunch of fun.

Yeah, absolutely. This is great.

Cool.

Thanks for having me.

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